US deficit projected at $1.6 trillion

The US budget deficit will soar to almost $1.6 trillion this year, the highest on record, fuelled by president Barack Obama's $787 billion stimulus package and reduced tax revenues due to the recession, both the White House and Congress have warned yesterday.

The deficit in 2008 was $455 billion, about 11.2 per cent of the overall economy.

The White House says the deficit will grow further. The Treasury in July said the federal deficit has topped $1 trillion for the first time and could grow to nearly $2 trillion by this fall. (See: US deficit set to hit $2 trillion).

Some analysts blamed soaring healthcare costs for the grim data.

However, White House budget director Peter Orszag said the president will press forward on health care despite the yawning budget gap, arguing that reform is essential to reining in the skyrocketing costs of government programmes such as Medicare and Medicaid.

As the White House released its budget update, the Congressional Budget Office (CBO) also released a similar report, confirming the administration's projection.